Chris Whalen is famous lately for predicting a return of the subprime crisis in 2011. His thoughts on the greater mortgage system are also interesting, as discussed in an interview with King World News.
Whalen says GSEs don’t help homeowners. Rather they promote a system that locks marginal borrowers into costly interest payments, helping their own bottom line.
“If you’re a wealthy American you can [refinance], but if you’ve got a seven-something FICO score and you’re in a so-so neighbourhood so the collateral doesn’t have a big score in the equation, you’re screwed,” Whalen says. “These are the people Fannie and Freddie doesn’t want to see prepay, so they can keep the income on their portfolio. It’s horrible! People don’t realise how predatory these government agencies are.
“Everything Orwell ever wrote was true and it’s proven by the way people like Barney Frank and Chris Dodd have personally benefitted from this housing mess, while they’re actually hurting the poor people most.”
Listen to the full interview at King World News.
Whalen says the foreclosure crisis will bring a normalization of home prices and that finally “Americans are going to learn how to price a mortgage and they’re going to understand what is in a mortgage.”
His long term solution? Abolish the GSEs and the Fed while you’re at it.